March 25, 2014

The Obamacare Benefit That Gets No Respect
The uninsured aren't the only ones who benefit. The underinsured do too.

Everybody wants to know whether the Affordable Care Act will significantly reduce the proportion of Americans without health insurance. It’s an extremely important question. It’s also not the only one that matters.

Obamacare’s goal isn’t simply helping the uninsured. It’s also supposed to help the “underinsured”—people with policies that are so expensive to maintain, or leave such large gaps in coverage, that paying for health care is still a devastating burden. This problem hasn’t gotten nearly the attention it deserves. A new report, just out from the Commonwealth Fund, seeks to change that.

According to the report, which became public early Tuesday morning, some 32 million non-elderly Americans were in households that spent a “high share of income on medical care” during 2012. That’s a little more than one in ten non-elderly Americans. The majority, though by no means all, are poor or near-poor. (See graph above) Add them to the number of Americans without insurance at that time, and you end up with about 79 million people, or nearly one-third of the non-elderly population, that was at risk of not being able to pay for their medical care before the Affordable Care Act became law.

The Commonwealth Fund report uses a very specific and somewhat complicated definition of under-insurance, based on how out-of-pocket costs and premiums compare to household income. (You can read the full explanation here.) Not everybody would agree with that definition. Conservatives tend to support higher out-of-pocket spending, because they believe it discourages wasteful spending and improves market competition. As such, many would probably argue the Fund’s definition of under-insurance makes the problem seem a lot worse than it is. That's a totally fair argument, at least for those who hold the conservative point of view.

Liberals see things differently. One of their biggest complaints about the Affordable Care Act is that it doesn't do enough to help the underinsured, because the minimum requirements for insurance under Obamacare still allow for high cost-sharing—and because the government isn't doing more to push down medical prices generally. As a result, lots of people will remain underinsured, even once all of the law's new regulations, subsidies, and programs are fully in place.

But there’s no question that, overall, many fewer people will be underinsured because of the Affordable Care Act. Not only does the law subsidize the purchase of insurance, providing greater assistance to people with low incomes that need it. (Andrew Sprung has written about these people for the Atlantic.) It also subsidizes out-of-pocket spending—significantly reducing what less affluent people could pay in co-payments, deductibles, and the like. The truly poor, meanwhile, are supposed to end up on Medicaid, which nearly eliminates personal spending altogether.

“The Affordable Care Act will significantly reduce underinsurance since it sets a national floor for benefits, requires that plans cover a minimum level of costs, bans pre-existing condition exclusions as well as lifetime and annual benefit limits, and increases cost-sharing protections for people with low and moderate incomes,” says Sara Collins, who is the Fund’s vice president for Health Care Coverage and Access and a co-author of the paper. “The problem of underinsurance is most pronounced among low and moderate income families and the provisions of the law are well-targeted at significantly improving coverage for people who have in the past spent large shares of their income on health care.”

Of course, the Affordable Care Act’s impact could be a lot bigger if more states were agreeing to expand eligibility for Medicaid, so that all poor people were eligible rather than only those who fall into certain demographic categories (like children or pregnant women). The Fund report breaks down its results by states. Sure enough, the states refusing to create broader Medicaid programs tend, with some exceptions, to be the ones with proportionally more underinsured residents. (See graph above.) That, too, is a part of the Obamacare story that hasn’t gotten nearly the attention it deserves.